BW Legal World Brings Women Leaders to Decode the Laws for Home-Based Ventures for Women Entrepreneurs

India has countless talented female entrepreneurs that despite facing challenges in their daily routines stand themselves in this harsh market. Women managing a home-based venture provide flexibility to meet family responsibilities and avenues for employment. To start home-based businesses, make sure you have all the licenses to operate it or else it might cause a problem in future. 

To discuss this issue and much more,  we had some great women leaders with us on this International Women’s Day. We had- Pallavi Puri, Partner, J. Sagar Associates; Firdouse Qutb Wani, Managing Partner, L.C.Z.F law firm; Pallavi Bedi, Partner, L&L Partners law offices; Savitha Jagdeesan, Senior Resident Partner, Kochhar & Co.; Madhu Chaudhary Gadodia, Partner, Naik Naik & Company and the session was moderated by Ashima Ohri, Managing Editor, BW Legal World.  

In the first place, the moderator, Ms Ashima Ohri said, “The stats that we have in hand, would be useful to get started. Women represent 39% of the global workforce but account for 54% of job losses as of May 2020. Furthermore, women are represented in sectors that are most heavily hit by the pandemic that being the hospitality or the food services industries which have further exasperated the inequalities. Now, the participation of women working as gig workers via various platforms is widely believed to be concentrated in beauty and wellness services or formalized care work or food delivery sectors. India has the highest number of gig workers with 24% of Global Online labour per the Oxford Internet Institute's online labour index. When these new opportunities come with their own old hurdles, which is: lack of clarity and awareness. For now, only common sector workers have access to maternity benefits and other benefits. So, according to data, 90% of women remain outside of this formal workforce, which then, makes it even more important to address the concerns of these women freelancers and other home-based workers in many aspects. So, through this session, we hope to touch upon the contractual obligations that they must look into and the kind of business entity that they must choose along with the various laws that come into play when we speak of say the food delivery services; their rights and the kind of other aspects that we can touch on just so that they are on the right side of the law and inadvertently not making any infractions there”. 

Talking about the contractual obligations, Ms Bedi opines, “I think every female employee should keep in mind that any contract that you sign is a legally enforceable document, and that's why it becomes really important to ascertain what is it that you are signing. The end game for every female employee who's looking to get into consultancy or even providing services or goods, products, it's to know, what is it that you're getting into, and to get out of that the contract actually records, the understanding or the intent that you want from that document. So, I think it's very important to read what you're signing before you sign, and try and see that it says, what you want it to say. If you're providing some services, the description of the services, what are to be supplied services rendered, what are the timelines, and very importantly, what is the pricing going to be and is it going to be, then paid in how much time frame? So typically, these are things that kind of get negotiated. If you're negotiating with big companies, these things kind of become a bit difficult but I think you have to kind of gauge your position and then kind of start negotiating. But I think, reasonable type of things like the payment mentioned, it is important and even a recipient of services, who is engaging you realizes that, so if we start from 30 days sometimes it could be 15 days, but sometimes 45 days, so kind of depends but make sure that it is kind of provided. Moving on, as to timelines are important as to, then, the employer or the service recipient can hold you accountable. Then there are lineal provisions in the contract, which are standard provisions. So, typically you would have people telling, these are boilerplate standard clauses. Let go, there's no room for negotiation here, but it's important to take a step back and kind of read them, so there'll be certain things like an indemnity clause or what would be the consequences of a breach happening, so important to kind of go through and see that what you're getting into, is what you want. So to that extent, tomorrow you are in a position to meet up to the promise that you are entering into, and then also rely on the contractual framework that you are entering into to enforce any rights, so the other clauses would be how long so what should be the term, what are the breach instances, let's say the company goes insolvent, so you want to protect yourself and have a right to walk out in case of those things, then what are the consequences be damages via indemnity clause that you want to provide, see that it does not impose too many onerous obligations, and something that you can kind of life. The important clause is the dispute resolution mechanism,  very important to have that against the jurisdiction of courts, to go for I think the preferred mode these days is arbitration, because that's faster and kind of easier to handle and especially with amendments in our Indian Arbitration Act, it's working well. Though it's ad hoc arbitration, I think that's a preferred mode. Lastly, I would say that if it's a long term contract, then certain clauses like a force majeure and I think this gains importance on account of the pandemic that we've been going through, the importance of force majeure clauses in contracts has really been reinforced and that's important to have, so try and kind of factor in these provisions. Broadly, these are the things that you must look out and try and see that it is at least somewhere close to saying what you really want it to say, and if not, then cost questions get into discussions, get into negotiations to get to a contract that that works for both sides”. In addition to that, she also explained about the notice period. She said, “notice period is something that actually would depend on the kind of the contract that you are entering into. So, the extent of the scope of services or the supply of the product, it completely depends on that so but in terms of the notice period, or if it's a pure employment. There also is going to be Consultancy Services, or it's going to be a normal employment. So, anywhere between, I would say, 1-3 months is what is seen in the market. From an employer's perspective it's more geared towards 3 months because they want to kind of lock the period. It would depend actually at the time, what your negotiating position is, and to be reasonable to kind of push, anywhere between 2-3 months seems to be a reasonable notice period and that's something that you should bargain for. In terms of the contract, being a lawyer for over 18 years I've heard that lawyers unnecessarily complicate things. Unfortunately, to some extent I think it's going through the fact how contracts have been historically written, and they have kind of been carried on. But having said that there is a huge change that's happening in the last couple of years, where people are understanding that it's important. So, I would imagine from consultants perspective, I think you should pick up the 3 or 4 most important clauses for you that, your liability is well defined. What you are going to render, what is going to be the pricing, when can it change what instances, and what are the payment terms? So, those are the clauses that you should go after and streamline and negotiate heavily, so that the intent there is kind of completely captured in the contracts. Lastly, under Indian law, things like maternity benefits, they are extended to employees who are employed and then there is a requirement that the establishment must have 10 and more employees and that's when they are there to render, but so the employees are protected, to that extent because it is a benefit given to them under law, so every employer needs to honour that. But for a consultant, unfortunately, it's not that clear because it's not a mandate, though, the recent code last year of Social Security that has come has tried to target the organized sector for their social security benefits and that includes maternity benefit. So, they try to move and there is a requirement of getting registration etc. If you're a consultant and it is something that you want, then I think this should definitely be recorded in your contract, then it will become your contractual claim. Most big organizations, if they once contractually agree to give you benefits like maternity benefit, which is kind of a sensitive issue for most organizations, they honor that”. 

Moving to the choice of business entity, Ms. Puri expressed, “we have a couple of options provided for a cooperation of companies, the two main options are a private company or a public company. Of course, in the Ventures we are talking about, you typically look at setting up a private limited company. There is also an option of one- person company which has been introduced by law. And then there is an option of an LLP. Now, to my mind, and as a legal adviser, I would tell everyone to have a legal entity incorporated and this is not only because it is beneficial from a legalistic perspective but also because if you see, the government has started doling out a lot of incentives and exemptions for startups, and the kind of audience that we are looking at, entrepreneurs, etc will all fall in that category. There are startup exemptions as a recent notification of 2019 where the government has opened up startups given them a lot of tax exemptions. There is a self- certification process that has started. As recent as a few months back, the government has also started a seed fund where they themselves kind of, giving initial funding to a lot of startups and if you actually see the trend that has been in the industry last four or five years. Most of these startups have really boomed. If you don't have a legal entity, then you're basically just dependent on your own capital right to run your show, but where you have an incorporated entity which is recognized under the law you can get funding and can grow. I have been advising loads of startups over the last 4 or 5 years, and they have tremendously grown because of having a legal entity in place and you get a lot of attraction from VCs, like I said, coming to the form, a private company, and an LLP both work, both are eligible under the startup India to get concessions from a tax perspective of course. But I think a lot of people are moving towards an LLP structure as against a company, but let's see if this budget opens up some concessions for startups per se, but it seems like the industry norm is to definitely have a legal entity in place through which you can then establish your business, get some foothold in the industry, attract more investors, get capital, grow, and it's actually sector agnostic. It doesn't matter which sector you are or what you want to do, it is important to just have an entity, as it helps you in your growth”. Further sharing her views on registration and time for incorporation, she said, “if you're on compliances, a company which was incorporated under the Indian companies act has certain compliances. Compliances are much less in an LLP. OPC is, again, a very new concept I mean it's been around for a long time but it's not really tried and tested you don't find so many OPC’s in the market. Again, I would say that go by an LLP structure initially because compliances are almost zero. But sooner or later when you start growing, investors would want you to convert into a company because there has some additional benefits in terms of tax benefits which your company gets, which an LLP doesn’t get. As you grow, you can list and give the investor some exits which an LLP cannot keep right so investors also look at it from a listing and their exit perspective, of course it's a long way for now to kind of list etc. But keep all of that in mind maybe start as an LLP get enough capital, get your foot in the market, establish your business and then move on to a company and honestly, incorporating a company or an LLP is become very simple now. It's a single window, clearance have one form where you can just, get your name, your PAN, TAN, all your other certifications and registrations which you need for just setting shop and of course then you need to get into sector-specific licenses which depending on the industry you are in. For incorporation it would take “between 10 to 20 days I would say, depends on how good your paperwork is and if you have a name approval in place. So, I would say roughly around 3 weeks, depending on getting all your documents in place. In fact, a few months back I think just post lockdown we did an incorporation and in three and a half, four weeks we managed to get the company up and going. Your directors have DINs etc, you don't really need to reapply right because a DIN can be used across”. 

Telling about the licenses and certifications, Ms. Jagdeesan expressed, “I think the lockdown has brought up cooking everybody. Home-based Baker, one thing I would say, is very much important, it is a requirement of FSSI license which is your Food Safety Standards of India. A lot of the bakers essentially think that because they're doing at home, it is their residential complex, the residential context is not a requirement. You definitely need that license, where the difference arises is what is the category you’re fallen, what kind of a turnover you're beginning to do. So, if it is a small business, if it is something that is below 20 lakhs, you essentially just require that license. What is also imperative for you to remember that it doesn't require you to have another set of, kitchen area or anything of that people definitely do that baking from your home provided, whatever the safety standards that are put there, which is the sanitation, there will be checks that would happen, you would have to essentially ensure that, because if in the event you do not, you will definitely incur a penalty and a fine. Another very interesting thing that has also happened is a lot of Bakers are working out, not independent houses, but residential complexes, and there have been issues with regard to letting's say, the fact that you're running a commercial establishment inside a residential complex is that allowed or not? It is very much allowed, but where that issue arises, if you were doing it in your independent house, the fact that the residential complexes had their own bylaws and their society rules, which sometimes becomes a hindrance. So, I would tell the whole because you just put it costs to society, get that permission, it's not that it's required for the license, it just enables you to work so you don't have to have a tussle with that particular complex body when they say you're using the utilities more, you're having these people coming in from outside. I would say, just bring them on your side, it's a lot easier, but it's not a requirement. Even when you apply for the license, your rental agreement is all you need. You don't need the permission of your landlord. Also, there is an organization set up rather like a lab testing that has been set up by FSSI that does the training, gives you the requirements on how to run your little business and gives you the standards that are provided. And this is set up in a lot of the major cities and liberal cities, and you can very easily access this, it enables and helps you have a better system. I also would suggest, especially the home bakers have all got huge logos and names that you go for your trademark registration. Another thing is, I don't say that you do need to set up an entity until and unless you start growing you're visualizing something larger than yourself. There is no such requirement doing it as a proprietorship is a lot easier for you, the taxability issue is also taken up. But yes, if you hit a turnover of about 20 lakhs, anything that is a food product requires a GST registration. Otherwise, by and large your trademark, your FSSI license holds you in good stead and of course your sanitation. The FSSI license is also required”.  

Furthermore, Ms. Wani opines, “when they have come up with businesses, and they have put in investment in manner of finances as well as the time. In case there is something not working in your favor, in case you feel you're being harassed by the employer, you feel that you are not being paid your dues. So, what in that case? So, any freelancer, even if the business is at a very small level, it's necessary and it's very important that a freelancer has to enter into a contract with the employer, no matter what. Until and unless things are not in black and white. You cannot be protected, whatever is there in black and white. You can say that there is a breach, that you have been violated. Now, we have many labor laws in our country. But unfortunately, the definition of a labor or the workmen, it doesn't encompass your freelance workers. Now keeping in view that you do not have a statutory protection of these laws, it's very important that you're protected by the contract. So, it's very important that when you are entering into a contract with the employer, first and foremost, you should not feel that in case you will ask for a contract, then the employer will not assign you any work. I have seen, many of these freelancers they feel, if the employer will see that I have done a good work, then they will oblige to us, if we will ask for anything in future. But no, if you devalue yourself in the beginning itself, then it's going to be a trend, it's going to affect the market as well. So, in such a case where an employer is telling you that once that employer will get money from the client, then it will be paid to you, just say no, for that you need to have a specific clause in your contract that no, this is the work, and once I finish this, this payment should be there. So, in case you made it as per the milestones, maybe you will get some work, some payment, and then you can actually retain the rest of the work that you have done, in case you will give all of the work and then you are not getting paid, so it's better that you go this way. Also, I have seen, employers forcing freelancers to finish work at the earliest, and they say they do not have time for anything else they will say that no you do it within 3 or 4 or 5 days. Normally, if somebody is working in a company as an employee, they would get overtime, but here you will not have that overtime because you're not protected by the labor laws of the country. So, in that it's very important that you have a clause for a rush fee as well. Let's say you're rushing a person to complete a finished work, and why somebody goes for freelancing, because you want to have time for yourself and you must have seen mostly it's females who go for it. The number of times a female wants to invest some time in the family as well. Now if you are consumed completely by the employer and you're not even being paid for that, so it's good that you should go for rush free as well. When you have entered into a contract, but you're not being paid well for the any of the contract clauses is being violated by the employer. In such a case you have a remedy in the civil courts, you can actually use that contract because it's in black and white. That's what I said, until and unless you don't have it written, it's not violated because you're not protected. Here, it's to be kept in mind that you do not have a statutory right, you have legal rights. Many times, some of the clients, or some of the queries come to us, where they say these big corporates, which have given us assignments if we will file a civil suit against them, they have this panel of lawyers, they have money, and they have a certain amount for litigation purposes, but we don't have that. So, they think of giving away, but I want to convey, that we have Legal Services Authority Act 1987. So, irrespective of whatever job she is doing, irrespective of whatever money she is earning, she can go for free legal aid. In all these legal service authorities, all the lawyers who have been impaneled, they are completely scrutinized and they're very good. I myself have been there, and other very well- known lawyers there and they in fact volunteer to provide free legal aid. So, any woman who feels, is being harassed, not being paid even if it's there in the contract which is entered into, so she can actually go and use this legal service authority Act, which is the section 12 C which gives this benefit. So, it is there to protect them. I also want to add that, Posh act, it says agreed women, it doesn't talk about anybody who is with a government body or a private body, as an employee, it talks about a woman so all the freelancers are covered under Posh act”. 

Advising on the E-commerce or social media business, Ms. Gadodia mentions, “this is really the world of influencers. When we do contracts with influencers, we realize that it's such a big market, and we end up doing more contracts for influencers than even for the celebrities. So, this is for everybody that, the first thing you have to be very mindful about the fact that what you are endorsing. One is to express an opinion about a product, and the other is to endorse the product. So, when you're expressing an opinion, it's about your personal opinion based on your personal experience, or it could be hearsay. At the same time when I'm endorsing, it's a paid endorsement, so there my personal experience may or may not be involved. So, it's very important to make it clear that whether it's a paid endorsement or whether it's a personal opinion that is being expressed. The other thing is that it's always advisable that even if it's a paid endorsement, you do a proper due diligence, because the amendments under the Consumer Protection Act, the liability of an endorser is very large, and it's not confined to monetary penalty, its penal in nature, so you could be even subject to imprisonment. So, what is very important for an influencer is to be cognizant about the new amendments, to do a proper due diligence to also be very sensitive and cognizant about what you are speaking. Sometimes when we get the use of these kind of endorsements, we realize that even one word here and there makes a big impact. It should not be misleading in any way. You need to be very particular and clear about what you are claiming, it should not be a false claim. Nowadays there is a lot of sensitivity regarding the content, it should not be disparaging to any other product, you have to be very mindful of that like a lot of times people do disparage other products, or all give that brief that there was recently a case in the Bombay High Court where an influencer expressed his opinion about using, and I can use the name because it's all in public domain so it's about the parachute oil, and he said that the product is really bad and he had a very bad experience, and Bombay High Court Justice Kathawalla, gave an injunction in relation to such kind of disparagement. Of course, the matter went in appeal, and the there is a stay on that order. But I do feel that you have to be very sensitive when you are particularly disparaging products. The other thing that I would also like to add is, sometimes it may be some kind of advertisement which may use a jingle. So, whether that is with proper license, whether the work is from a third- party authentic source or no is also something that you should take a representation from the brand that you're endorsing and make sure that all the licenses are in place, because the trend now is that when you sue, everybody comes into. If you use any product without permission, even if you add your bit to it, it doesn't absolve you from taking the permission. Copyright has a term, it is 60 years from the date of publication, in case if it's a film or a sound recording, in case of an underlying work like a script, it is 60 years from the date on which the author dies. Now, if a work is available in public domain say it's an old song, which is beyond 60 years, you can very well pick it up, make your own tweaks to it and do anything with it. But if there is copyright, then you need to obtain permission. Now, how would you know who owns because it's a big chain, so it may not be the producer, it may be lying with the author, it may be lying with the music company because these rights are usually sold to publishers or music companies. Well this is a dilemma, and you need to do, I am not trying to sell a legal service but probably you need to avail, a good legal service to do a proper due diligence. This happens with renowned companies also they take licenses and then they realize that, the representations were not proper, and then it's prone to litigation but for them it's okay because it's a daily job and they have lawyers on their panel and it's not so difficult, but definitely for an individual, there's a lot of reputation laws litigation is very expensive, it's not the cup of tea of an individual definitely unless you're backed by an organization. Sometimes even homemakers, or people who are operating at a smaller level, and they are into merchandising, those things also you need to take proper permissions. You may gift one on one to somebody and not attract any litigation but if you do it at a commercial level and if somebody comes to know about it, you can definitely be sued. Use proper industry sources maybe to get to it, have sometimes issue public notices because even when you acquire you are still prone so this is also intellectual property. Just like when you acquire property, you may still be susceptible to litigation. This is also intellectual property that may subject to litigation. It's also advisable to give public notice in case if it's something very pertinent to your business to say that if there are any third- party claims, then please come forward. But what is very important is to ensure that you have the correct chain of title. Also, just to add infringement is, again, a civil as well as criminal action so you will subject yourself not just to the risk of an injunction and damages but also the risk to imprisonment”.   

Please note: This article contains parts of automatic transcription, and has been lightly edited for a better reading experience. Some names and parts of the transcription may carry inadvertent errors that we are in the process of editing. Thank you for your understanding.